Systematic Investing Group

[lostcowboy]

Hi infooverload, first let me say that all of my spreadsheets are for testing the formulas plans, not for real investing. Also let me say that I have not been able to do any investing myself. One way to make Synchrovest more conservative would be to allow Synchrovest less access to the cash. You could have two cash accounts and when you have a sell, split the cash between the two. Let Synchrovest be only able to draw on one of the cash accounts.

I assume you have already downloaded my spreadsheets. In the Synchrovest spreadsheet, on row three are all the adjustments feel free to play with them. You will likely find B3,C3,D3,F3, and G3, all worth playing with.

Mr Lichello, started working on Synchrovest sometime after the 1968 crash/bear market. His investment in a mutual fund was in shambles. He learned the hard way that DCA alone was not the answer. One of the first things he saw was that he needed money for rainy day events, if he had been able to invest extra money in the crash he would have recovered much quicker. So he came up with his rule of investing 75%, and putting 25% away for a rainy day. He also decided to use a multiple based on average cost divided by current price. By using that when current price was below average cost, he would invest a larger amount. He was also concerned with investing as much cash as possible when the market was low. Which leads to his second investment rule, if the multiple is greater than one then subtract one from it and use the decimal part as a percentage of the cash to be added to the first formula. He also thought that by the time you had a 100% profit the bull market was likely over and it would be a good idea to sell out.

When you build your spreadsheet or (on paper) formula plan. Here are some things to think about. You could use a multiple based on several things added or multiplied together.
You could use a multiple based on your average price as you buy stock. http://books.google.com/books?id=XeaorGgYAXsC&pg=PA311&lpg=PA311&dq=accelerated+dollar+cost+averaging&source=bl&ots=HUaa_srgaO&sig=mx596IIuVuM_voR41y16WlFV0kM&hl=en&ei=7VzKSqnNGImwtgfLwoWaBQ&sa=X&oi=book_result&ct=result&resnum=1#v=onepage&q=accelerated%20dollar%20cost%20averaging&f=false

you could also use a moving average of the current price. This used to be on dripadvisor before it was sold to a new owner. http://web.archive.org/web/19991004130251/www.dripadvisor.com/calc/about.shtml



about the second formula ,the percent of cash, you don't have to use it if you don't want to. You could also change it to a real percentage, that would also change how fast you use up the cash.
Example: average cost is $10, and current price is $5. Using the old rules you get 10/5= 2 times monthly installment , plus 2-1= 1, for 100% of remaining cash.

You could change it like so. Keep the first rule, you get 10/5= 2 times monthly installment. But change the second rule to a true percent. If the multiple is greater than 1 , take (average cost- current price)/average cost, for a true percentage. you would want to get rid of the negative sign.
((5-10)/10)*-1= 50%, times cash. As you can see there are all sorts of formulas that one can use.

Last but not least here is a copy of post number 10.

Here is some more interesting stuff on DCA. In her book Practical Formulas for Successful Investing by Lucile Tomlinson, Mrs. Tomlinson has a chart that shows how long it would take for a DCA plan to reach 40% profit, the time period varied from 2 1/2 years to 10 1/2 years long, most were about 5 years long. She seemed to be recommending stopping the plan at that point, as she goes on to say that after reaching 40% the plan tended to just follow with the market. Another thing she said was that If one were to combined a DCA plan with a Constant ratio plan one could get greater profits.

I have not made a spreadsheet to test this, but I have full confidence in Mrs. Tomlinson that this would work. I feel that you will end up with greater profits than DCA, but less profits than ether (Value Averaging) or Synchrovest.
PS: I think that most of the people on http://www.bogleheads.org/ use this.

Take care,
Clifford